Timely Reporting Claims to EPL Insurers

Employers who are new to Employment Practices Liability (EPL) insurance are often surprised by how quickly claims must be reported to the insurer. ?Most EPL policies are written as “claims made and reported” insurance. This means they require claims to be reported to the insurer within the same policy period that the claim is made against the insurer, or within a short extended-reporting period after the end of the policy period. Weimer, Satre, Whitman and Speidel, Employment Practices Liability, Second Ed., pp. 10-13 (National Underwriter).

In most EPL policies, the timely reporting of claims is a “condition precedent” to coverage. This means it is an absolute requirement – a threshold that must be crossed before the potential of coverage emerges. It is irrelevant whether the delay in reporting the claim caused prejudice to the EPL insurer. Thus, any delay in the timely reporting of a claim is risky with an EPL policy.

By contrast, the insurance policy most businesses are familiar with – the Commercial General Liability (CGL) policy – does not normally make the timely reporting of claims a condition precedent to coverage. The late reporting of a CGL claim generally does not bar coverage unless the delay prejudiced the insurer. See Weimer, Whitman, Hagglund and Hillestad, CGL Policy Handbook, Second Ed., Section 13.01 (Wolters Kluwer). But that somewhat-relaxed approach to reporting CGL claims does not work with EPL insurance.

Employers may delay reporting employment claims under their EPL policy for many reasons. The employer may hope to handle the initial stages of the claim “in house” and avoid the costs of securing outside counsel or satisfying a portion of the deductible while, at the same time, avoiding a potential increase in premium that may follow reporting the claim. From a risk-management perspective, that is penny wise and pound foolish.

For a comprehensive analysis of common EPL insurance policy provisions, as part of a larger risk-management strategy, consider an a training session with a commercial insurance attorney for your HR employees and risk managers.?